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Effects of Short-time Work Schemes on firm survival during the Covid-19 crisis: insights from new Spanish data

Garcia-Clemente, Javier and Congregado, Emilio (2022): Effects of Short-time Work Schemes on firm survival during the Covid-19 crisis: insights from new Spanish data. Forthcoming in: Eurasian Business Review

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Abstract

This paper analyses the aggregated survival rates of more than a million employers followed quarterly from April 1st, 2020 to April 1st, 2021, using the Company Demographic Profile database, a new experimental statistic provided by the Spanish National Statistics Institute. Our approach makes use of fractional regression methods to explain the survival rate by region, sector, size and whether or not a Temporary Workforce Reduction Scheme (also Short-Time Work Scheme) had been used within the firm. These public schemes, known as ERTEs in Spain, were widely used during the pandemic and temporarily subsidised employee ́s wages, relieving labour adjustment costs to the employers. Our main results, based on the omputed average marginal effects, show that the survival rate was significantly higher for those firms which take up ERTE programs among their employees. Nevertheless, this effect was not homogeneous, particularly benefiting the most vulnerable firms. These firms were, as expected, the smallest –from 1 to 5 employees– and the ones which operate in some service sectors as leisure, education, tourism and hospitality.

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